The Forex market on the daily chart formed a bull reversal bar yesterday in an extreme sell climax. It was caused by the bears taking profits.
The short covering might only last a day, like on March 2, but this selloff is extreme. The move down from the Feb. 25 high is a parabolic wedge. Also, there is a wedge bull channel with the Jan. 1 and Feb. 5 lows. At a minimum, there should be a pullback above the Feb. 5 breakout point by the end of next week. The short covering could continue for a couple weeks and reach the March 3 high.
What traders are now deciding is if yesterday will be the low, or if there will be one more brief low first. The Nov. 4 low is an important magnet on the weekly chart. The EUR/USD will probably get there within a couple months. But it will likely work higher over the next couple weeks, even if there is one more brief new low first.
Overnight EUR.USD Forex trading
The 5-minute chart of the EUR.USD Forex market has been sideways over night. It’s high is below yesterday’s high and its low is above yesterday’s low. It is an inside day so far.
This is the fourth consecutive day when it is testing 1.19. The bulls want today to go above yesterday’s high and trigger a buy signal. That would increase the chance that the EUR/USD has put in a minor low.
The bears, however, want today to close near its low. Today would then be a sell signal bar on the daily chart after only one day of profit taking, like March 3. What is different this time is how extremely oversold the EUR/USD is. That increases the chance of higher prices, which means the bulls have the best chance of forming some bull days since early February.
The EUR/USD sold off overnight and then reversed up. However, the reversal has not been strong, and the EUR/USD has spent move of the time in small trading ranges on the 5-minute chart. Day traders are buying and selling for scalps. But because of the extreme sell climax, there is an increased chance of at least small bull trend days over the next couple weeks.
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